Companies raise $6.9 bn, 33% less than previous quarter, over worries Fed may raise rates
Fund raising through external commercial borrowings slowed in October-December 2014 with companies raising $6.9 billion, 33.5% less than the July-September quarter. Mop-up through forex loans fell to $637 million in December, data from the Reserve Bank of India showed.
Mop-up through ECBs fell in December over worries that the US Federal Reserve would raise interest rates sooner than expected and subdued activity owing to holidays.
Loans borrowed through the automatic route were $492 million while through the approval route were $146 million. Oil India’s loan worth $125 million borrowed to refinance previous ECB was the biggest borrowing in the month followed by Air India’s loan of $99.5 million.
Loans borrowed to fund import of goods totalled $136 million followed by $133 million borrowed to refinance earlier costly loans.
In October and November, big deals such as $750 million by Reliance Jio Infocomm taken for rupee expenditure, $750 million by Tata Motors borrowed for refinancing and $200 million by Larsen & Toubro to refiance repayment of foreign currency convertible bonds gave a boost to fund raising through ECBs.
The total fund raising through ECBs in 2014 stood at $33.5 billion, largely similar to the 2013 data.
Liberalisation of ECB rules by the RBI as well as rock bottom interest rates globally have boosted fund raising through forex loans. While the London Interbank Offered Rate, the benchmark against which loans are priced, is still ultra low, the one-year LIBOR rose marginally in the October-December period.
The RBI had eased norms for ECBs progressively from simplifying procedures in August to allowing companies to park the funds raised through ECBs in bank deposits for up to six months until they finally use these funds.